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Cory Booker: Wall Street’s Newest Political Hooker

Victor Epstein
Painful Truths
by Victor Epstein
May 22, 2012
… Progressive darling shocks admirers by defending private equity firms


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Photo By David Shankbone
Photo By David Shankbone

If I've learned anything about elected officials during my 20 years in journalism, it's that while they act dignified around us peasants in the 99%, they’re completely capable of acting like groupies around the 1%.

In short, class matters to them.

Newark Mayor Cory Booker illustrated this weakness Sunday with his inept defense of private equity firms, like Republican presidential candidate Mitt Romney’s Bain Capital, during a muddle-headed appearance on “Meet the Press.” It was the political equivalent of donning a mini-skirt and a pair of kneepads and declaring “I like big political contributions, who needs a date?”

It’s the latest screwup by a man who many in the 99% had viewed as a symbol of the generation of progressive, courageous, honorable and sacrificial leaders needed to stem the 30-years of societal decay rotting away at the very foundation of our democracy.

No more.

Booker showed his true colors when he described himself as “very uncomfortable” with the attacks on private equity firms that have followed revelations that Bain Capital made money by breaking up companies and putting Americans out of work. He even had the audacity to compare these exposes to the 2008 attacks on President Barack Obama for his membership in Jeremiah Wright’s Chicago church.

"This kind of stuff is nauseating to me on both sides,” said Booker, a Democrat. “Enough is enough. Stop attacking private equity. Stop attacking Jeremiah Wright. This stuff has got to stop.”

“I'm not about to sit here and indict private equity,” he said. “If you look at the totality of Bain Capital's record, they've done a lot to support businesses — to grow businesses.”

For shame.

The two things have absolutely nothing in common. The Rev. Wright’s sometimes wacky declarations from the pulpit never hurt a friggin soul. His statements about the 9/11 terror attacks representing the American empire’s “chickens coming home to roost” were thought-provoking at best, crass at worst and definitely poorly timed. However, they were irrelevant to a national economy being gutted by Wall Street’s predatory ways.

Obama campaign strategist David Axelrod publicly rebuked Booker earlier today for his Meet the Press miscue, saying he was "just wrong."

Greedy, ambitious, unprincipled and just flatout wrong.

Booker was defending a group that includes some of Wall Street's most predatory firms even as more than two dozen members of Occupy Wall Street were being injured and more than 90 were being arrested for protesting against them at the NATO summit in Chicago (below left). It's a safe bet that Booker would have been there in his college years However, he's now a political beneficiary of the largesse generated by the predatory 1% bent on earning his keep.

Axelrod told MSNBC that Romney's experience at Bain, which the Republican has made a centerpiece of his campaign, "speaks to an economic theory that isn't the right economic theory for the country."

Photo By Mpeake
The painful truth is that private equity firms exist to squeeze more profit from businesses by any means necessary. Not to advance America’s communal interests. They serve anyone with money, regardless of whether it's Moammar Gadhafi or silver spoon Donald Trump, and typically do so by investing enough to gain control of a publicly traded company and take it private so they can remake the business model without causing the stock price to nosedive.

The difference between private equity firms and people who simply buy and sell stocks is that instead of just investing in a business managed by someone else, private equity manages the business. In some cases, it even creates the business.

When the sector functions properly it serves like a vulture or catfish by digesting dead and dying businesses and then resurrecting them in a more useful and competitive form. However, there is a segment of private equity that seems to specialize in profiting at the expense of society and favors ventures that tie the poor and faltering middle class into a cycle of debt.

Maximizing profits is "not always going to be good for communities or businesses or workers," said President Obama, who defended Booker as an excellent mayor. "The reason this is relevant to the campaign is because my opponent (has made his business experience) his main calling card for why he thinks he should be president."

While it’s possible for a private equity firm to do something for the greater good, that's not their purpose. They exist to enrich their clients. Sometimes that means destroying generous American jobs in mature industries and funneling the savings from lower labor costs into profit.

We're not just talking about extraneous jobs either. The efficiency experts of private equity are one of the main reasons so many members of the 99% are now doing the work of two of even three people, even as the productivity gains we produce are claimed by global investors.

This is not an abstract concept for those of us in the 99%.

We were so short-staffed at my last mainstream news job at a U.S. publication owned by the Bahrain-based buyout firm "Investcorp" that I couldn't even take a sick day unless a fellow editor was willing to fly into the main office in New York City from Savannah, Ga., in the winter of 2010. When he couldn't make it on short notice, I worked sick - and it didn't matter to upper management how sick - during one of the harshest and longest winters in recent years.

Investcorp had whittled the staff down to 12 reporters and two editors by February of 2010 from 22 reporters and five editors in 2007. When I suggested we were cutting meat instead of fat I was invited to shut the hell up.

The first step for private equity for the past 30 years is almost always to funnel money out of labor costs at a mature business and into profits for their global investors. That means cutting jobs and reducing employee benefits and salaries as Bain did after it acquired American Pad & Paper in 1992, and shifting jobs overseas.

Bain used Ampad to purchase an office supply plant in Marion, Ind., where Randy Johnson worked making hanging folders. Johnson told Businessweek that he and his 257 colleagues returned from the July 4th weekend to learn they'd all been fired. Bain invited them to reapply for their jobs at lower wages and benefits.

Johnson said his pay fell 22 percent, from $10.05 an hour to $7.88. When the union called a strike in 1995, Bain closed the plant and laid off everyone in what can only be described as business as usual for them.

And Romney wants to be president?

President of the 1% or the 100%?

Another favored tactic of the worst private equity firms is to monetize a company's positive brand reputation - which is corporate-speak for betraying the trust of consumers. That's exactly the kind of move Netflix tried to pull last year with their 60% price hike and the garbage Facebook is pulling right now by selling off private information its users thought would be kept sacrosanct.

Private equity is fond of breaking up mature companies and selling off the pieces when they’re worth more to investors that way; they'll use an acquired company as collateral to facilitate additional acquisitions, as Bain did with Ampad; and even bust out an acquisition's stellar credit to run up debts like the gangsters on The Sopranos.

Private equity will mix and match parts afterward to cobble together something that can be pitched to stock markets via an initial public offering. Unwanted pieces are sometimes loaded down with debt first as Campbell Soup did with Vlasic International Inc. in 1998, when it foisted $560 million of debt on the subsidiary and spun it off in a disgraceful move that wound up costing 2,000 workers their jobs.

It's like capitalism with brass knuckles.

It's important to keep in mind that each layoff represents a family tossed into economic crisis. Many will fracture under the pressure as spouses divorce and idled workers withdraw from society. Others will be bankrupt by uncovered medical expenses. Some will take their own lives in despair

All so some fat-cat in Saudi can buy another Rolls or some sellout here at home can get some fake pecs. It's gravy for them. Turkey for us.

The idea that companies are employment engines that play a vital role in the local communities where they operate and their owners have a patriotic responsibility to the greater good just never comes into it for Romney and his business peers. The worst private equity firms simply do not buy into the part of the American compact which maintains we’re all in this thing together.

Private equity funds exist to serve a global audience of elite investors. Not just their fellow Americans. And the worst target the faltering middle class via predatory businesses that range from debt collection to pay day loans to predatory lending to redlight traffic cameras to for-profit colleges, while using politicial hookers to block consumer protection efforts.

So why would Booker defend them?

Well, elected officials with serious Wall Street backing can basically do what they want, instead of being beholden to a party line, as U.S. Sen. Chuck Schumer (D-N.Y.), New York City Mayor Michael Bloomberg (I) and former U.S. Sen. Phil Gramm (R-Texas) have shown us. They’re the political equivalent of baseball’s most prized free agents.

Booker’s unconscionable defense of private equity is ridiculous by almost any other standard, except his own lack of business acumen. It’s a shameless play for big money donations as he tries to lift his game for a run at the New Jersey governor’s mansion in 2013 or the U.S. Senate seat of 88-year-old Frank Lautenberg (D-N.J.), who faces re-election in 2014.

It also confirms one of the more cynical views of the Occupy Wall Street movement, which is that neither Dems nor Republicans are capable of representing the interests of the 99%. In short, when both major parties are bent on currying favor with Wall Street investors - aka rich people from around the world - the poor and faltering middle class right here at home are left without any meaningful representation.

Couple that with the tax breaks political hookers have lavished on Romney and his peers and it's easy to conclude the 99% is facing the same kind of taxation without representation that spurred the American Revolution.

The odd thing is that most Americans still don't get it. They have the same attitude toward being turned into white-collar slaves in their own nation as teenagers have about getting killed: "I've never been killed before, ergo I cannot be killed."

By the same token, we've got laid off workers with no health insurance and no job prospects who are too terrified to exercise their freedom of speech who seem to think "I've never been turned into a white-collar slave before, who pays taxes for rights and benefits enjoyed only by the 1%, so it can't happen."

It can and does because of people like Cory Booker.

Booker has a longstanding friendship with Chris Christie, New Jersey’s Republican governor, which dates back to their days in Newark as a U.S. Attorney and city councilman. The two remained friends after Booker became mayor in 2006 and Christie became governor in 2010. They made a video last week (left) in which they poked fun at their different styles. It's already drawn more than 300,000 views on YouTube.

One is likely to wind up in the governor’s mansion and the other is probably going to succeed Lautenberg, unless Christie risks taking the job as first mate on the ill-fated cruise ship Romney. Or Booker is too arrogant to learn from for his disastrous appearance on Meet the Press and rediscover the commitment to the greater good which once made him so special.

This is not the first time Booker has crossed party lines. He fought with the big unions that had run Newark into the ground early in his tenure in New Jersey's largest city, backing charter schools to the dismay of the United Federation of Teachers and angering the self-serving Newark chapter of the Fraternal Order of Police by naming an outsider as the city's police director.

This latest cross-party foray is different because it isn't about advancing the greater good - it's about currying favor with big money donors. A group that includes the financial buccaneers who have waged an undeclared class war against poor and working families since 1980.

The last thing America needs right now is another political hooker willing to spread their legs for Wall Street, which is entangled in an insane obsession with profit growth by any means that is undermining our democracy and roiling economies around the world. However,

Illustration By Cheryl Gross
that's exactly the shameless and lucrative role Booker tried to stake out for himself Sunday.

Meanwhile, the U.S. economy is still spiraling downward with no end in sight, largely because our own pay-to-play government has been enabling monopolistic behavior instead of policing it.

How does it work?

Affluent industries pay off the elected officials looking to rein them in, just as for-profit colleges did last year to preserve their ability to pilfer the Federal Treasury via the Pell Grant program. And just as the pay day lending industry has done to preserve its ability to charge the kind of 900% annualized interest rates that would have made loansharks blush prior to 1983, when the state usury rates that capped annual lending rates at 11% were circumvented.

Private equity funds are the common denominator in both predatory industries, which seek to lock the poor and middle class into a cycle of debt.

By allowing political hookers like Schumer to draft the rules an industry needs to function like a monopoly, its leading members can achieve the financial benefits of private collusion without exposing their companies to antitrust claims.

The practice is so established that federal lawmakers have a term for it: "self regulation."

For-profit colleges are far and away the most blatant example of the acidic role the worst private equity firms play in our society. The sector is devoted to exploiting the 99%, but managed to blunt regulation efforts last year and engage in the legalized collusion of self regulation simply by purchasing political hookers like Cory Booker.

Warburg Pincus Private Equity is the principal investor behind Bridgepoint Education, the publicly traded for-profit college that's become a poster child for everything that's wrong with the sector. Its instructional costs have fallen to 24% of revenue over the past seven years from 69%, which means only 24 cents of each tax dollar we spend on educating students at Bridgepoint's University of the Rockies and Ashford University is actually used for that purpose. Much of the remainder is funneled to private equity's global investors in places like China and Saudia Arabia, which was home to 15 of the 19 terrorists in the 9/11 attacks.

Students paid $14,000 for a massage therapy certificate at one for-profit college that was available at a local community college for $520, according to a report by the U.S. General Acccouting Office.

The defining quality of the for-profit education scam is that the poor and faltering middle class are forbidden from escaping their student loans via federal bankruptcy protection and some wind up repaying them well into their retirement years. Meanwhile, that very protection is accorded to the for-profit colleges and private equity firms that locked them into that cycle of debt in the first place.

What's not love about that kind of exploitation of our own by private equity?

But before we reach any hasty conclusions about the predatory private equity firms draining more than $26 billion a year in education dollars from the Federal treasury, let's try to look at the bright side. Jobs are being created at these for-profit colleges for morally-challenged Americans willing to exploit the more than 1.8 million members of the 99% they now enroll.

I know one.

A childhood friend from the Bronx spent two or three years looking fruitlessly for work in northwest Florida with his useless bachelor's degree in communications and equally useless master's in psychology, and five kids. Finally, with the wife poised to divorce him, he just tossed in the towel on being a standup guy, took a job as an admissions pimp for a for-profit corporation called "Education Corporation of America" (ECA) and began barraging me with messages about being close to Jesus.

ECA is owned by a private equity firm called Willis Stein & Partners. It's headed by a guy named Avy Stein, who allegedly threatened to “make life rough for" Sen. Tom Harkin last year when the Iowa Democrat tried to rein in for-profit colleges, according to The New York Times.

“I took it as a threat," Harkin said of Stein, who donated $6,400 to then New Jersey Gov. Jon Corzine in 2009 and $5,000 to the state Democratic Party. "It was one of the most blatant comments ever made to me in my years in the Senate."

Why wouldn't Cory Booker want to defend the Avy Steins of the world?

Prior to Booker's Sunday backstab of the 99%, many of us had viewed him as someone with the moral fortitude to put a stop to this pay-to-play nonsense. We thought he was the kind of person who would impose the regulations needed to rein in the Wall Street professionals who aren't talented enought to turn a profit without hurting their fellow Americans, before they destroyed the rest of us and joined their largest investors on Dubai’s Palm Islands.

However, A ThinkProgress examination of New Jersey campaign finance records for Booker indicates he's not just an ambitious politician looking to auction himself to the 1 percent. He's already on the payroll.

Venture capitalists, investors, and big Wall Street bankers donated more than $115,000 to his 2002 campaign, including $5,000 from members of Bain Capital. The “Booker Team for Newark” joint committee also received a pair of $15,400 contributions from Bain Capital Managing Directors Joshua Bekenstein and Mark Nunnelly.

Booker and his committees received more than $565,000 in all in 2002 from the Wall Street interests he defended Sunday and at least $36,000 came from folks at Romney’s old firm, according to ThinkProgress.

The painful truth is that the over-arching problem isn't really Wall Street so much as the portion of it which isn't talented enough to make any money without hurting their own, in combination with the avarice of an immoral political class that simply cannot say "no" to them.

For all the big talk against regulations by the likes of the infamous Koch Brothers, the best Wall Street professionals would simply adjust to any tighter rules that were passed and continue to make money. That’s what they do – game systems.

You can establish any regulations you want and the most talented people on Wall Street will find a way to make money off of them. So, why don't our elected officials establish rules that also advance the greater good?

Because it’s harder for political hookers to solicit a legalized bribe when they're doing the right thing, whereas lobbyists pay them a premium for selling the rest of us out.

Think I'm lying? Look at what's happened to health care reform the past 20 years.

Booker has been in Newark for 17 years now and it’s clearly time for him to move on and up. However, the way he does that matters and shamelessly pitching himself to Wall Street is not the way.

The Republican Party quickly made hay of Booker’s Meet the Press miscue, sending an email to supporters about it and encouraging them to sign a petition on their main page at www.GOP.com (right) saying “I stand with Cory Booker.”

The former college tight-end is already backtracking for all he’s worth. To hear Cory tell it he's a victim in all this of the big bad GOP.

“I'm very upset that I'm being used by the GOP this way,” Booker said. "Here they are plucking sound bites out of (the Meet the Press) interview to manipulate them in a cynical manner, to use them for their own purposes.”

Duh. We're living in Cynical times Cory, or didn't you notice when you sold the rest of us out to champion private equity?

You really have to wonder what is happening to Booker in recent years because the Rhodes Scholar has made a number of disastrous decisions. Chief among them was an embarrassingly brief showdown with Newark’s insular police union in November, which was followed by the lay-off of all of the young, idealistic and highly productive officers who joined the force under the Booker administration - 162 in all. Innovative police chief Garry McCarthy (right) subsequently jumped ship for Chicago.

Advocates for the greater good had waited years for Booker to really go toe-to-toe with a police union which helped make Newark a regional hub for the lucrative illegal drug trade. When he finally toed the scratch the battle was over before we knew it.

Check and mate. Police union.

Same kind of thing happened when Newark's overpaid and nepotistic City Council scotched Booker's efforts to create a municipal water authority last year in a bid to patch a $70 million budget hole.

Check and mate. City Council.

And when Booker tried to challenge local political powerbroker Steve Adubato with his own slate of local candidates in 2008. Adubato's North Ward Center wound up with a $500,000 donation afterward from longtime Booker supporter Oprah Winfrey in exchange for making nice with Cory.

Check and mate. Adubato.

The 79-year powerboker is probably the "Steve" that was cryptically mentioned in the Booker-Christie video in a bid to assuage his easily buised ego.

The problem is that Booker is both a maverick and a bit of a gambler. Those tendencies are fine when you have good data and are surrounded by good people with the cojones to tell you when you’re flat-out wrong. But that’s not the case for a Booker Team that’s choking on the intellectual deadwood of lackeys who will say and do anything to curry favor with Booker.

Much like Howard Hughes, the 42-year-old Booker loves the flattery and the echo chamber. He can't get enough of it. And that’s the real problem at work here and ultimately the potential energy for his political undoing.

The other problem is that Booker is a bit of a lightweight when it comes to business and needs to put more time into really understanding economics before he starts running his mouth about them. He earned a bachelor’s degree in political science and a master’s degree in sociology at Stanford University before attending Yale Law School. Afterward he went right to work as a community organizer. No economics, no business, no accounting.

As a result, Booker is overly dependent on his 1% supporters for much of his business knowledge, which sometimes leads to his parroting their views.

When I was in Newark he had a penchant for seeing what he wanted to see when it came to business issues and for prematurely announcing economic development projects which never panned out.

These ranged from a $150 million officer tower called Liberty Plaza that was supposed to serve as a cornerstone for downtown development to a $90 million residential tower that Shaquille O’Neal was supposed to build near the New Jersey Performing Arts Center. Neither project ever came to fruition, although Liberty was the subject of a lavish press conference in 2008 where Booker praised his own moribund economic development efforts.

Officially, both projects are still on "hold" four years later. There's a good chance they'll remain in that politically convenient stasis until Booker leaves the mayor's office or the U.S. economy experiences a protracted upswing.

No one in the Booker administration ever held a press conference or sent out a statement about the suspension of the Liberty Plaza project when I covered New Jersey for The Associated Press in 2008-2009. I learned of it strictly by chance when I found Tucker Development's artistic renderings and blueprints in my building's trash and discovered their local sales office had been shuttered.

I  met with then Newark economic development director Stefan Pryor - one of Booker's closest friends -  immediately afterward and was told the project had been placed on "hold." This absurd claim was quickly followed by a litany of conceptual eco devo projects meant to create the illusion of positive development momentum, even as the credit markets that bankroll such projects were grinding to a halt.

I hate misleading readers. Loathe it. The journalism equivalent of fraud is being fed a line of knowing misinformation by a politician and cluelessly repeating it to your readers. To borrow a line from Booker - it's "nauseating."

Finally, enough was enough.

"Show me a crane Stefan - show me one crane," I said incredulously, pointing out his office window at the Newark skyline. "You don’t have a single friggin crane at work anywhere in the entire downtown area and that’s really all anyone needs to know. People don’t throw away their blueprints when they put a project on hold Stefan. They do that when they're closing up shop and moving out."

In retrospect, I should have known right then and there that Booker was more of the same. More of the self-serving political trash that has steadily pushed the 99% out of its own democracy the past 30 years.

At some point he has to decide whether he's in politics to advance the greater good or exploit his fellow man. Pandering to private equity as he did on Meet the Press is about advancing self.

The bizarre appearance was reminiscent of a surreal experience I had in Southwest Florida in 1999 while trying to interview a prominent developer for that rarest or rarities – a legitimate positive story about a responsible development.

I hadn’t spoken with Bonita Bay Properties President Dennis Gilkey for more than a minute before John Albion, the chairman of the local county commission, made a beeline for us. I had thought Albion was an elegant, reserved, principled man – much like Cory Booker – until I saw the way he behaved around a political donor with deep pockets.

The man who interrupted us behaved more like an ambitious groupie than someone worthy of elected office. He started talking and just would not shut up. It was as if he thought Gilkey would ask him to leave the moment he stopped to catch his breath, which is exactly what wound up happening.

The developer and I stared at one another in amazement as Albion pattered on –  unwanted and unwelcome – before Gilkey finally asked him to excuse us so we could finish the interview. 

Why?

Because in Southwest Florida, developers are the big money that gets politicians elected. In the New York City metro area and our nation's capital, it’s the predatory financial services firms of Wall Street. Cory was angling for their money Sunday when he debased himself on Meet the Press.

All of which brings us back to two fundamental journalism survival skills I ignored last month at my own peril after Booker pulled a neighbor from her burning home. First - never write a positive story about a U.S. politician. And second - never fall in love with an elected official.

Why?

Because they’ll always let you down. It's just a question of time.

I thought Cory Booker was a good guy prior to Sunday and even went so far as to say so in an April 13 column that now looks ridiculous:

“Do I think Cory is ambitious?

“Hells yeah.

“Do I think he would do something he knew was wrong to advance himself to higher office?

“No.


And that is a powerful and unusual thing to say about anyone who chooses the public circus of political life for their career.

I’m a cynical bastard after 20 years in journalism, but I know what good is and there’s a world of difference between Cory and the selfish trash that’s typically drawn to politics.

That said, it's amazing to encounter a politician who really believes elected office is about advancing the greater good. And there may be no greater indictment of the status quo than the positive way people respond to Cory for that - as if they've never seen it before and may never see it again.

Boy was I wrong. Apparently, there is no difference between Booker and the selfish trash which is typically drawn to politics. At least not any more.

Apparently, I don't know what good is. Cause Booker's price has been named and he's morphed into just another opportunistic political hooker looking to get paid.

And to think I actually liked this guy and thought he was someone worth knowing. I used to look forward to interviewing him and watching the way he treated ordinary people as if we really mattered. The operative phrase being "as if."

How dumb am I?
 


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